Reviewing ways to repay trust fund

One of the reasons that voters approved the constitutional amendment to allow the state to borrow $437 million from the state’s Trust Fund was because the Governor and legislative leaders promised that they would repay the money.

The bill that Republican Sen. Bryan Taylor filed would require the state to repay the money over the course of ten years, and does not require the state to pay any interest on the borrowed money.

Sen. Taylor’s bill is unacceptable.

A week after the amendment was passed, Moody’s Corporation, which provides credit ratings and analysis of financial markets, issued a report that said our credit rating is at risk because we are now relying on “non-recurring revenue for operations.”

The report went on to say that, “The state’s planned multi-year use of those funds signals that its structural budget imbalance will make it difficult to implement the intended repayment. Inability to adopt a plan to return to structurally balanced General Fund operations could negatively affect the state’s rating.”

So now we have yet another reason to pay back the Trust Fund, and to do so as quickly as possible. But the question is how?

The bill sponsored by Sen. Taylor would require the government to repay the amount over the course of ten years and without any interest payments.

Sen. Taylor’s bill does not specify where the money will come from to make those payments.

The Governor and Republican leaders in the legislature are already talking about cutting a billion dollars from the budget and pushing as many as 5,000 state employees into early retirement just to keep the budgets solvent. Where are they going to get the money to make the interest payments?

And even if we pass Sen. Taylor’s bill we may still lose our credit rating. Like the Moody report said, we have a structural budget imbalance.

So if we take more money out of the General Fund Budget to make the payments, we will actually be doing more harm than good.

Taking more money from the General Fund for the payments would make the budget even more structurally unsound as well as put us right back where we were before we borrowed the money in the first place – with several vital programs like Medicaid and public safety on the brink of collapsing.

So what are our options?

House Democrats are preparing two proposals that would repay the money to the Trust Fund in five years instead of ten – with interest – without taking one dime from the General Fund or Education Trust Fund. In fact, our proposals would increase revenue for those budgets.

Lottery option

One option would be to create a state lottery. Fiscal experts estimate that a state lottery would raise about $250 million per year.

At that rate, we could repay the Trust Fund with interest in just three years.

After that, all of the money raise from the lottery would be divided with a portion being used to increase classroom supplements for teachers to purchase basic classroom supplies and the rest going into a program to provide scholarships to students who maintain A/B Honor Roll.

Another option would be to pass a $1.00 cigarette tax increase.

Financial experts estimate that the increase would raise $227.5 million per year, which would be enough to pay back the Trust Fund with interest in less than five years.

After that, the money raised from the tax increase would be divided to help fund Medicaid and to increase funding for roads and bridges (which, in turn, would help create jobs and put the economy back on track).

Alabama voters approved Amendment One because they expect the Governor and Republicans in the Alabama legislature to repay the money, but the Republican plan to repay the money is unacceptable.

The Republicans would take ten years to do what should be done in half that time.

Furthermore, they would do it without making any interest payments and by using money that should instead be used to fund vital government programs like Medicaid and Public Safety.

Their plan would also put the state’s credit rating at risk. Democrats are offering two reasonable alternatives that will not only avoid these issues but will provide more money for education, Medicaid, and our infrastructure.

It is time to get serious about our state’s finances, and Alabama Democrats are ready to lead the state back to financial stability.